SECURITY AGREEMENT
Agreement made as of _____________________, 2006, between St. John's
Realty Corporation, with a mailing address in care of Austern & Austern, P.C.,
X.X. Xxx 000, 0 Xxxxxxx Xxxxx, Xxxxxx Xxxxx, Xxx Xxxx 00000 (hereinafter
referred to as "Debtor"), and Lilac Ventures Master Fund Ltd., with a mailing
address c/o Omicron Capital, LP, 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000, as agent for the Secured Parties listed on Schedule A (hereinafter
referred to as "Creditor").
In consideration of the mutual covenants and promises set forth herein,
the parties agree as follows:
1. CREATION OF SECURITY INTEREST.
Debtor grants to Creditor a first security interest in the
collateral described in Section Two, to ensure the performance and payment of
Debentures by the Debtor to the Secured Parties of this date in the initial
aggregate amount of Two Million Five Hundred Thousand Dollars ($2,500,000) (the
"Debentures"), and performance of a Securities Purchase Agreement and a Loan
Agreement between Debtor and Creditor of even date, as they may be amended, and
any additional Debentures issued to the Creditors. (All capitalized words not
defined in this agreement shall be defined as described in the Loan Agreement.)
The Debentures, Securities Purchase Agreement, Loan Agreement, and all documents
executed thereunder by any of the Borrowers are referred to as the "Loan
Documents.")
2. DESCRIPTION OF COLLATERAL.
1
The collateral that is subject to this security interest
consists of the personal property of the
Debtor of the following description:
The following properties, assets and rights of the
Debtor, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds and products thereof (all
of the same being hereinafter called the "Collateral"): all
personal and fixture property of every kind and nature including
without limitation all goods (including inventory, equipment and
any accessions thereto), instruments (including promissory
notes), documents, accounts (but excluding health-care-insurance
receivables), chattel paper (whether tangible or electronic),
deposit accounts, letter-of-credit rights (whether or not the
letter of credit is evidenced by a writing), commercial tort
claims, securities and all other investment property, supporting
obligations, any other contract rights or rights to the payment
of money, insurance claims and proceeds, and all general
intangibles (including all payment intangibles).
3. OBLIGATIONS OF DEBTOR.
a. PAYMENT. Debtor shall pay to Creditor the sum evidenced
by the Debentures, or any extensions or renewals thereof, in accordance with the
terms of the Debentures, and all other amounts due Creditor under the Loan
Agreement, and the Securities Purchase Agreement.
b. FINANCING STATEMENTS. At the request of the Creditor,
the Debtor will file all necessary financing statements and other instruments in
a form satisfactory to Creditor, and will pay the cost of filing such
statements, to perfect Creditor's security interest in the Collateral.
c. LOCATION AND IDENTIFICATION OF COLLATERAL. Debtor will
not remove the Collateral from its places of business located at Long Island
City, New York, and Plymouth and Groton, New Hampshire, without the written
consent of the Creditor.
d. MAINTENANCE OF COLLATERAL. Debtor will not, without the
written consent of Creditor, sell, lease, encumber, or otherwise dispose of any
interest in the Collateral, and Debtor shall keep the Collateral in good order
and repair. Creditor shall have the right to inspect the Collateral at
reasonable times, upon reasonable notice.
2
e. INSURANCE. Debtor shall insure the Collateral to the
satisfaction of the Creditor. Such insurance shall be for the benefit of the
Debtor and Creditor as their interests may appear.
f. TAXES. Debtor shall pay promptly all taxes and
assessments levied on the Collateral.
g. RECORDS AND ACCOUNTS. Debtor shall keep an accurate
record of the Collateral and will deliver a copy of such records to the Creditor
at such intervals as the Creditor may reasonably require.
h. ADDITIONAL LIENS. Debtor will not grant or incur any
other lien, security interest, or other encumbrance on the Collateral without
Creditor's prior written consent.
4. REPRESENTATIONS OF DEBTOR. In addition to any representations
and warranties contained in the Loan Agreement, Debtor represents and warrants
that it is a corporation organized under the laws of Delaware.
5. DEFAULT. If Debtor fails to pay when due any amount payable on
the Debentures, fails to perform any of the provisions of this agreement, the
Loan Agreement, or the Securities Purchase Agreement, or any representation or
warranty is materially false, and upon lapse of any applicable grace periods
contained in the Loan Documents, Debtor shall be in default. In addition to all
rights granted the Creditor under the note and Loan Agreement, Creditor may
exercise any and all of the rights granted by Part 6 of NHRSA 382-A, Article 9,
as to Collateral in New Hampshire, and any equivalent section of the Uniform
Commercial Code in effect in the State of New York as to any other Collateral.
Creditor shall be entitled to collect from Debtor, and to deduct from the
proceeds of
3
the sale of the Collateral, its expenses incurred in enforcing this agreement,
including reasonable attorneys' fees and legal expenses.
Written notice mailed to Debtor ten (10) days before public or
private sale of the collateral shall constitute reasonable notice. Creditor may
require Debtor to assemble the collateral and to make it available to Creditor
at a designated place reasonably convenient to both parties. The Secured Parties
may purchase the collateral at a private sale.
6. NEW HAMPSHIRE AGREEMENT. This security agreement shall be construed
according to NHRSA 382-A and all other applicable laws of the State of New
Hampshire.
IN WITNESS WHEREOF, the parties have executed this agreement on the date
written above.
St. John's Realty Corporation
By: __________________________________
Xxxxx Xxxxxx, President
Lilac Ventures Master Fund Ltd., agent
By: __________________________________
4
